Fuel prices weigh on distributors - The Packer

Fuel prices weigh on distributors

09/09/2011 02:40:00 PM
Andy Nelson

NORWALK, Iowa — Diesel fuel is a buck higher per gallon this summer, compared to the summer of 2010, and distributors are doing everything they can to soften the blow.

Making sure trucks are as full as possible and routes as efficient as possible are more important than ever, said Brendan Comito, chief operating officer of Capital City Fruit Inc.

The company also keeps a close eye on its drivers through on-board GPS systems, Comito said.

“If they’re idling, we point out how expensive that is.”

The ever-expanding locally grown movement also has helped Capital City mitigate high fuel costs, Comito said. After making their deliveries, many Capital City trucks backhaul local product to Norwalk.

“It’s cheaper than having someone do LTL freight for you,” he said.

At least once a week, Scott Danner, chief operating officer of Kansas City, Kan.-based Liberty Fruit Co., talks with company owner Arnold Caviar about high fuel costs and what the company can do to offset their effects, Danner said.

Fuel costs in the summer of 2011 are about one-third higher than they were last year at the same time, Danner said.

And they’re not easy to absorb.

“It’s a direct bottom line hit,” Danner said. “You just can’t pass them along. Customers don’t want a surcharge.”

Being in the more sparsely populated Midwest makes matters worse.

“I joke with my friends back East, ‘The next market for you is 15 miles away. Here it’s 200,’” Danner said.

Liberty Fruit’s distribution net reaches as far as Dallas in one direction and Arkansas in another. But the company hasn’t had to drop any routes this year because of high fuel costs, Danner said.

That’s due in large part to being more ready for the high costs this time around. Several years ago, when prices spiked, distributors like Liberty Fruit got smarter, Danner said, and figured out which routes could be cut.

Now, companies are much more vigilant.

“We review it all the time,” Danner said.

“There is such a thing as bad market share. If you’re not making money (on a route), why have it?”

High freight costs have, however, paid off in one way for Liberty Fruit, Danner said.

Demand for the company’s peeled, sliced, diced and otherwise cut onions, potatoes and other commodities has risen because of high freight costs shipping from the West Coast.

“It’s helped us attract other wholesale markets,” Danner said.

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